Holland’s largest pension fund and a German banking giant settle one small chapter in the financial crisis

10th February 2013

The arguing continues over the financial crisis and, of course, about who and what is to blame. But in some places, deals are being done and settlements agreed, if not quite not blame apportioned.

A story in Investment & Pensions Europe reports that the Netherlands’ biggest pension fund, the civil service fund ABP has reached a settlement with Germany’s number one bank, the mighty Deutsche Bank over sales of Residential Mortgage Backed Securities.

There are no details about the amounts involved but ABP had taken Deutsche Bank to the New York Supreme Court in September 2011 alleging that it had purchased RMBS’s on a ‘false and misleading’ basis. The two have now settled though as we say no blame has been apportioned.

ABP still has cases pending against what would be in other circumstances an impressive line-up of Goldman Sachs, Merrill Lynch, Credit Suisse, Morgan Stanley and Ally Financial.

Mortgage backed securities were the products which were arguably most responsible for the financial crisis, although derivative-based insurance contracts related to them were also to blame. It turned the US mortgage market, though especially the sub-prime part of it, into a source of global banking contagion provoking an unprecedented global credit and liquidity crunch with Governments forced to step in to rescue banks across the world.

Those products and those rescues are of course part of the problem with British banks. When they pay fines for various misdoings and skulduggery, it is taxpayers who find themselves in line to pay because of the bailouts.

This story suggests we are still coming to a reckoning about the financial crisis. It also shows that perhaps it is better to be represented by a giant pension fund, which can fund its own global legal actions, than to be a smaller investor wherever you are in the world. If you are not a direct investor but are five steps down the line, it is not quite so easy to work out who you should sue even if you could afford to.

And the crisis, when it does end, may not do so with a bang or a whimper but with a tap tap of emails and a flurry of papers exchanged between lawyers.